The end of traditional wealth management: 20/20 with eToro Founder Yoni Assia

Posted June 16, 2016. By Eoghan McNeill

Four years’ time. What’s the world going to look like in 2020? We’re asking people in our network just that, for our interview series 20/20. In this instalment, we talk to eToro Founder, Yoni Assia, ahead of his co-founder’s appearance at our fintech event, MoneyConf.

Yoni has said that these cigar smokers are the people currently managing $117 trillion in assets worldwide. That’s 300 times the market cap of Apple. He says that they manage these assets with little-to-no transparency, poor customer experience and that investment is accessible only to the rich.

He wants to change that. “Most people look at finance and think of it like an ivory tower. There are very few people who really understand what’s going on in this world, and understand how you transact,” says Yoni.

He says that international wealth is managed on personal relationships and secret information that moves from mouth to ear in a series of closed circles. Yoni should know – he’s been trading since the age of 13, when he was given shares in his father’s Tel Aviv Stock Exchange-listed company as a bar mitzvah present. Rather than let the shares sit, Yoni requested power of attorney and started trading. Further illustrating his ties to traditional finance, Yoni’s grandfather is the founder of one of Israel’s biggest banks.

The essence of the dream

Yoni has understood wealth management from a young age. As a teenager he saw himself pursuing a traditional career with a firm like Goldman Sachs. Things worked out a little differently. Having undertaken training in computer science and acquired an SEC license for portfolio management, he co-founded eToro with his brother, Ronen, in 2007. It’s a social trading network that allows users watch, and then copy, the investment patterns of successful users. As of last year, 80 percent of 124 million copied trades have made money for eToro users.

The launch of the platform was driven by Yoni’s want to bring wealth management to the masses; to make it easy to invest in companies for the price of a meal. Ronen, an industrial designer, used to make fun of Yoni’s obsession with spreadsheets, charts and complex data. He wanted to bring accessible UX to wealth management. The result, although ostensibly a world away from Wall Street, is perhaps not far removed from Yoni’s teenage dream of managing accounts at a legacy company.

“I think that dream essentially came true. I have thousands upon thousands of traders from all around the world talking to me and sharing their ideas and trading portfolios. Instead of working at Goldman Sachs or J.P. Morgan, I just work at my own company where I get, in effect, the exact essence of that dream,” says Yoni.

Yoni’s dream came true – just not the way he first pictured it

International finance takes notice

The traditional world of finance that Yoni left behind to pursue building eToro have taken notice. Late in 2014, eToro raised $27 million in funding from Ping An Ventures, which is affiliated with the largest independent financial services conglomerate in China, and SBT Venture Capital, a fund whose main partner is Russia’s largest bank.

Yoni says that this investment is evidence of financial institutions realising that they need to partner with fintech companies to survive. He says that in the future we’ll be able to draw a clear line between these smarter institutions, and those who decided against embracing fintech – those who will get left behind.

Traditional wealth management agencies typically target a demographic aged 60 and upwards. Yoni says that eToro’s user base includes a 60 percent chunk of people aged between 25-45, so although the platform has attracted a usership younger than those typically engaged in asset management, it’s far from a site just for millennials. He says that the company is capitalising on a “huge transfer of wealth from older generations to Generation X”.

“The majority of the money in the world is still held by people who worked and made money for the past 30 years. People who are 45-50 now and have grown up with the internet expect a real-time mobile application. The level of reporting and engagement that you typically expect from asset management – getting a PDF once a month from a financial adviser or wealth management provider – doesn’t cut it anymore,” says Yoni.

EToro is going after a broad audience. Looking to the future, considering who will be in engaged in wealth and asset management, Yoni casts a wide net. He gives the example of the early days of the internet, and asks if it were put to you a quarter-century ago who would use the service, would you be able to imagine the scale of the web’s reach?

“Would you think it would be geeks who building computer programmes? Or would you think it would be only the richest people on the planet? Would you actually realise that essentially everyone in the world would have access to the internet?” he asks.

A new literacy

Yoni says that capital markets will achieve a similar reach, and that the general population will eventually access them. It’s just a question through what platform, and how much money will be needed to do so. He says that signs of increasing financial literacy are already visible with general knowledge of major tech IPOs like those of Twitter and Facebook, and Microsoft’s recent acquisition of LinkedIn. He says that this literacy will only increase, despite the attitudes of traditional financial institutions.

“Most financial institutions are telling people they don’t need financial literacy; that they don’t need to understand how the markets work. They’ll ‘take care of it for them’. Our vision is that more and more people will become financially literate and will understand what’s happening in the markets. It’s interesting; it’s engaging; it’s constantly moving; it’s global. It’s the same language spoken in every country in the world. Everybody speaks the language of capital markets and money,” says Yoni.

While old wealth management was based on the notion that information was to some extent proprietary, Yoni envisages a world where knowledge is shared; where trading is open and transparent. He sees a new breed of part-time traders who will be able to access and understand money management and take on big players in London, Hong Kong or New York at their own game, saying, “We can do it better than you guys.”

With or without the cigars.

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